Stock (Symbol) |
Walgreen’s (WBA) |
Stock Price |
$82 |
Sector |
| Food & Necessities |
Data is as of |
| April 28, 2016 |
Expected to Report |
| Jul 7 – Jul 11 |
Company Description |
 Walgreens Boots Alliance, Inc. (Walgreens Boots Alliance) is a holding company. The Company is a global pharmacy-led, health and wellbeing enterprise. Walgreens Boots Alliance operates through three divisions, including Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale. The Company’s products are marketed under a number of brands, which include No7, the Botanics range, Almus (generic medicines), Boots Pharmaceuticals and Soap & Glory (bathing and beauty brand). In addition, the Company has investments in Guangzhou Pharmaceuticals Corporation and Nanjing Pharmaceutical Company Limited. The Company operates in around 25 countries, which include the wholesale and distribution network with over 340 distribution centers and more than 180,000 pharmacies, health centers and hospitals in 19 countries. Source: Thomson Financial |
Sharek’s Take |
 Walgreens Boots Alliance (WBA) delivered so-so results last qtr. The drugstore chain had 11% profit growth last qtr on a 14% gain in sales. Same store sales rose a modest 3% and the company beat the $1.29 estimate by a mere 2 cents. These were decent results, but WBA’s P/E is 18 and this performance is likely not enough to push the stock higher. But looking ahead, profit growth looks to average 14% the next 4 qtrs, and if WBA can beat the street as it has been doing perhaps we could be in for high-teens profit growth. On December 31, 2014 Walgreen’s merged with Alliance Boots, which is made up Boots UK, the UK’s leading pharmacy-led health and beauty retailer, and Alliance Healthcare, the largest pharmaceutical wholesaler in the UK. The influx of new management has transformed Walgreen’s to a leaner, more efficient machine with better merchandising. Profits are better as management works on efficiency. Now Walgreens is buying Rite Aid and the sale should close in the 2nd qtr. Management should be able to get more out of Rite Aid stores. Walgreen’s is a conservative stock which has increased its dividend since 1976 and at one time grew profits 34 consecutive years. At 18x earnings WBA is a good stock for long-term investors but it doesn’t have what it takes to make a big move higher right now. |
One Year Chart |
 Looking at this stock…it looks like WBA is a dead fish floating on the water. But that’s OK, at least the stock is building a base here at $80. The company ends its fiscal year on August 31st, and as that approaches investors will look ahead to next fiscal year when the company is expected to earn around $5 in profits. A 18 P/E on $5 in profits equates to a $90 stock. Profit growth Estimates for the next 4 qtrs are 12%, 16%, 15% and 11%. Not bad if the economy is rough, but in a raging Bull Market this wouldn’t impress me. |
Fair Value |
 Walgreens is a quality company and I feel the P/E needs to be a bit higher than normal to justify this. My Fair Value on this stock is 20x earnings, which is $90 today and $101 later in the year. |
Bottom Line |
 Walgreens has had a rough decade, but in decades past has been a real winner. I feel the Boots Alliance team has brought new life into the company. Management buys back stock, makes acquisitions, and pays a dividend — a recipe for success. I feel they will improve profitability at Rite Aid. But this company is only delivering mid-teens profit growth so growth oriented investors might get bored here. WBA ranks 11th of 35 stocks in the Conservative Growth Portfolio Power Rankings and 29th of 37 stocks in the Growth Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
29 of 37Aggressive Growth Portfolio N/AConservative Stock Portfolio 11 of 35 |
